Gas Natural Inc. (NYSE MKT: EGAS) of Mentor denies it’s for sale, but it’s contending with a lawsuit from former CEO Richard M. Osborne, whom the company alleges “verbally assaulted several board members and physically assaulted a member of the board and the company’s outside legal counsel” at a May 1 meeting.

In a news release issued Tuesday morning, July 15, Gas Natural commented on what it characterized as “an erroneous report” from The Deal published by TheStreet.com last Friday, July 11, which claimed the company was engaging in a process to put itself up for sale.

“The board of directors has not been, nor currently plans to be, engaged in a process to sell the company,” Gas Natural said in its news release. “The board fully recognizes its fiduciary responsibility to consider a reasonable offer to be acquired, if any is offered to the company.”

James E. Sprague, Gas Natural’s chief financial officer and the person designated to comment on the matter, was not immediately available for comment this morning.

The Deal’sstory on TheStreet.com contended that Gas Natural — a holding company that distributes and sells natural gas to 73,000 end-use residential, commercial and industrial customers in seven states — “was recently talking to prospective buyers about a sale, but talks came to a screeching halt when former CEO Richard Osborne filed a lawsuit against the company.”

Osborne stepped down as Gas Natural’s chairman and CEO on May 1. It marked a pivot point in a tumultuous time for Gas Natural. In November 2013, the Public Utilities Commission of Ohio ordered an investigative audit of two subsidiaries of Gas Natural and all related companies, citing concerns about the companies' internal controls, the propriety of their executive compensation system and alleged self-dealing by management.

Gas Natural on May 15 named Osborne’s successor as CEO: Gregory J. Osborne, the son of Richard M. Osborne.

In its May 2 news release announcing Richard Osborne’s departure as CEO, Gas Natural said company officials and Richard Osborne “are currently in discussions concerning a severance arrangement.” The company said it would “announce the terms of any agreement if and when reached.”

But things haven’t gone so well since then.

See you in court

On June 26, Richard Osborne filed a lawsuit in Lake County Common Pleas Court against Gas Natural and its board of directors. Gas Natural described the lawsuit in detail in a July 3 filing with the U.S. Securities and Exchange Commission. You can access the filing here.

Richard Osborne in the lawsuit “demands payment of an earnout associated with Gas Natural’s (June 2013) purchase of assets from John D. Marketing,” according to the Gas Natural filing. He also alleges that the board of directors breached its fiduciary duties, primarily by removing him as chairman and CEO.

In addition to payment of the earnout, Richard Osborne “seeks injunctive relief (1) restraining our board members from ‘taking any actions on behalf of Gas Natural until they are in compliance with the law and the documents governing corporate governance’ and (2) enjoining the 2014 annual meeting scheduled to take place on July 30, 2014, until the board of directors is ‘in compliance with the law and corporate governance,’ ” according to the filing.

Richard Osborne also seeks compensatory and punitive damages. On June 30, the court granted the motion to temporarily delay the 2014 annual meeting.

With respect to the claim in the lawsuit involving John D. Marketing, Gas Natural said in the filing that it’s “currently following the dispute resolution process provided for in the purchase agreement governing the transaction which requires a binding decision from an independent accounting firm. The company believes that this agreed-upon process controls and a court of law is not the proper venue for this process.”

Gas Natural said in the filing that the company’s board of directors unanimously voted to remove Richard Osborne from his officer positions on May 1. The board “offered Mr. Osborne the opportunity to voluntarily retire from his positions as Chairman and CEO, an offer that Mr. Osborne accepted,” the filing stated. “In addition, the board offered Mr. Osborne a severance package, subject to negotiations of a mutually acceptable severance agreement. … Ultimately, the parties were unable to agree on a severance agreement, despite the board’s offer of a lump sum severance payment equal to three years of Mr. Osborne’s salary and retention of a company vehicle.”

The May 1 meeting went south quickly, as Gas Natural tells it.

From the filing:

”After the conclusion of the May 1, 2014 meeting, Mr. Osborne verbally assaulted several board members and physically assaulted a member of the board and the Company’s outside legal counsel. Mr. Osborne’s verbal harassment of members of the board and employees continued after his removal as chairman and CEO. Following the May 1 meeting, meetings of the board were held telephonically instead of face-to-face because members of the board and management wanted to avoid a repeat of the incidents at the May 1 board meeting. Nevertheless, Mr. Osborne’s verbal harassment of members of the board continued, impairing the board’s ability to function properly. The nominating committee recommended a slate of directors for election at the Company’s 2014 annual meeting that did not include Mr. Osborne and a majority of the board of directors chose not to nominate Mr. Osborne because they no longer believed that the board could continue to function in the best interests of the Company and its shareholders if Mr. Osborne continued as a director.”

William T. Wuliger, the attorney representing Richard Osborne in his lawsuit, said in an interview this morning that he was not at the May 1 meeting and was not aware of specific details, but that "what occurred there should not have."

"There was a decision made that affected (Richard Osborne's) status at the company, and that decision was made in his absence," Wuliger said.

He continued, "There were a lot of issues that occurred between Rick and members of the board, most of which were unnecessary, in my judgment."

Wuliger said he's optimistic the two sides are close to settling differences outlined in the lawsuit, and he believes the July 30 meeting will go ahead as planned, on that date.

"This was a stupid fight," he said of the disagreement between Richard Osborne and Gas Natural.

Richard Osborne himself returned a call around 10:15 this morning, but after a brief time on the phone said he needed to go and would return the call shortly. He had not called back as of 11:55 a.m.

Looking ahead

The Deal reported that as soon as the matter is settled, “the company will once again be on the prowl for a buyer.” It predicted that Gas Natural would have no trouble selling itself if it does try to do so, because interest in natural gas distribution companies is high, as are prices for those companies.

“Gas Natural could easily fetch north of $200 million in a sale,” The Deal predicted.

For its part, Gas Natural said in today’s news release that it is focused on internal improvements, improving its relationships with regulators and investing in the Maine and North Carolina markets, two of the seven states where it provides natural gas distribution to some of its 73,000 customers.